Scalley

Hi,

I've been in Calgary for about a month now, and was wondering if i could start an RRSP straight away? Some people seem to think that i will have to wait a year so i can provide evidence of the previous years tax return. Is this right?

Any help appreciated. See my previous posts for my immigration and landing experience.

Matt

Jim Humphries

Contribution limits are calculated from your previous year's income so, yes, it will be necessary to wait before you can put any investments in an RRSP.

Scalley

As always Jim, fast and to the point. Thank you.

One other thing which i forgot to ask. Do you know of any tips and tricks to build credit rating other than the usual; get a store card, get a low limit secured credit card, pay for insurance etc in installments.

Back in the UK, i had a 5000GBP limit. I come here, and i can't get any, despite a reasonable steady income. Very frustrating.

I don't even want the credit really. I just want to use it to avoid paying bank charges.

Other than that though, i really like it here, and everythings going great.

Regards

Matt

Jim Humphries

You could also consider online banking for regular bills. I am always surprised that credit should be so hard to transfer. I hope you kept your GB cards.

Scalley

Thanks Jim,

Unfortunately, online banking still counts towards transactions, so I still have to wrestle with banking fees.

I have kept my GB cards just in case.

I'll just have to be patient i guess, and wait for the "suits" to deem me an acceptable risk for credit.

Cheers

Matt

iaink

Have you tried presidents choice? www.pcfinancial.ca

john fisher

A friend recommended them to me, once we get out.
Are they part of the CIBC.

iaink

Sort of. Some type of subsidiary, but I dont quite understand the relationship. But its free, the service for me has been at least as good as my "regular" bank experience was, and I shop at one of the Loblaws parented stores, so I appreciate the grocery points as much as the lack of fees.

The experience has been positive enough that I have a range of products from them , including the MasterCard, Mortgage, and a small GIC type RRSP in addition to the regular bank accounts. No problems with any of them to date.

pjb001

Look into this very carefully. From my understanding, in year 1 you are not entitled to any RRSP tax benefits. In year 2 you are entitled to an amount which is calculated on the amount of time you were in Canada during year 1 (i.e. if you were only present for 50% of year 1, you get 50% of the benefit). Only in the 3rd year can you claim the full benefit. The amount you can claim is always shown on the bottom of your tax assessment.

There's nothing to prevent you paying into an RRSP, but you won't get the tax benefits unless you're entitled to them. Beware also of the complex rules regarding overpayments (i.e. payments into an RRSP which you're not entitled to) - these vary depending on whether you are part of a company scheme, or if you are paying into it yourself - but you can be penalised by CRA if you don't follow the rules.

The standard disclaimer: I don't have any financial training - the above is simply based on my experience (and relatively poor memory!) It may - or may not be valid at this point in time.

For formal guidance, look here:

http://www.cra-arc.gc.ca/tax/individ...sp/menu-e.html

Peter

Cowtown

This is completely wrong. You are also misusing the word "benefit". You can only pay into your RRSP if you have available contribution room as has previously been stated. You get contribution room by having earned income the previous year (and by submitting it on a tax return). No earned income= no contribution room. There is no provision relating to the length of time you have been here.

There is provision for a small amount of contribution without contribution room but I really wouldnt go there unless you really know what you are doing as the penalties can be quite severe - plus you dont get the tax deduction (probably what the poster was referring to as a 'benefit'.

Jim Humphries

Check with an accountant - I am not too confident with any of the answers here.

pjb001

An example to clarify - in my situation (moved to Canada in mid-2003):

2003 RRSP Deduction Limit = $0
2004 RRSP Deduction Limit = 18% of earned income in 2003 - as I was only in Canada for 1/2 of 2003, my Deduction Limit was only 1/2 of what it would have been if I'd been in Canada for the full year
2005 RRSP Deduction Limit = 18% of earned income in 2004

The parent post is, however, correct in that it is earned income rather than 'time spent' in Canada (important if you're not working!).

For formal guidance, check out T4055 'Newcomers to Canada' and T4040 'RRSP's and other registered plans for retirement' - both of which are great for insomnia...

Cowtown

I just asked myself! Yup, same answer!

Cowtown

This statement is only approximately correct if you change it to "as I was only [working] in Canada for 1/2 of 2003, my Deduction Limit was only 1/2 of what it would have been if I'd been [working] in Canada for the full year". Being present in the country is not sufficient.


Depending on the income level you receive this might not work out correctly. There are absolute caps on RRSP contributions where once you reach them it doesnt matter how much more you earn - you cannot earn further contribution room! Granted its on a highish income but it is still a factor.

It is much safer to just take the number off the bottom of your tax assessment each year and work with that. Especially if you are not aware of all of the details in the calculations.

You really dont want to be in a penalty tax situation with RRSPs. It works out around 1% per month of the overpayment - and it just keeps getting charged until you no longer have an overpayment. There are a couple of (rare) situations where you would advise a client to make an overpayment and just take the penalty hit - but you need to understand it before you do it. It is extremely unlikely that you are in one of these situations.

Scalley

Thanks guys,

So just to clarify - it's probably best to wait until the end of the tax year, then start an RRSP.

In actual fact, i would be unlikely to contribute 18% of my salary, so i might just start putting money into a savings account now, and then use that to max out my RRSP next year.

Cheers

Matt